TOKYO -- Japan’s Mitsubishi UFJ Financial Group is selling the retail banking division of its U.S. regional bank MUFG Union Bank to U.S. Bancorp, the largest regional bank in the country, in a deal worth around 800 billion yen ($7.3 billion), Nikkei has learned.
The sale comes as MUFG reviews its business structure amid lower interest rates and increasing costs from bricks-and-mortar operations. Union Bank has been central to MUFG's U.S. operations, along with the Japanese financial group's stake in Morgan Stanley. Under the deal, MUFG is likely to receive cash and U.S. Bancorp shares, as well as entering into a capital alliance with the U.S. bank.
The total amount of cash to be received and the value of the shares is expected to reach around 800 billion yen, and MUFG has already informed Japan’s financial watchdog about the move.
Union Bank has about 300 outlets, mainly on the West Coast. It was acquired by the former Bank of Mitsubishi and the former Bank of Tokyo in the 1980s, with the current corporate structure continuing from 1996.
Mitsubishi UFJ made Union Bank a wholly owned subsidiary through a takeover bid in 2008 after the global financial crisis. With $133 billion in assets, the bank is the 27th-largest in the U.S. The bank, whose predecessor has a history of more than 150 years, offers full banking functions ranging from housing loans and other services for individuals to corporate loans.
MUFG had aimed to make its retail unit in the U.S. another pillar of growth, but it faced difficulties integrating the business. It was also hit by the accelerated shift towards digitalization and a fading need for physical stores.
The business also became less of a priority given the low interest rate environment, which has led to thinner profit margins. Meanwhile, MUFG will keep Union Bank’s business operations for large corporations.